Foxconn to Cease Building Towns Around Its Factories – Chairman

Foxconn to Revise Business Model Considerably

by Anton Shilov
06/09/2010 | 12:43 PM

Foxconn Electronics, the world’s largest contract maker of various computer and consumer electronics products, said it would revise its manufacturing model considerably. The company would raise payments to its employees following an array of suicides among workers of Shenzhen factory, but would cease paying compensations and building infrastructure.

 

The Foxconn factory near Shenzhen, which manufactures devices for companies like Apple, Dell or HP, employs around three hundred thousand of people, who live in adjacent campuses, which naturally represent a small town. Terry Gou, the chairman and president of Foxconn, said companies, such as Foxconn, had to build a community from scratch around their factories when they entered China back in the eighties, however, nowadays such social functions have to be returned to the government, reports Financial Times. Apart from dormitories, the campuses also include other facilities, including department stores, sport and leisure facilities and so on.

Recently a number of Foxconn employees committed suicides due to inappropriate working conditions, according to media reports. Each of the employees’ families received compensations from Foxconn.

In an attempt to improve motivation of its workers, Foxconn plans to offer a 66% performance-related pay rise from October 1, in addition to a 30% wage increase (to around ¥2000, or $292) announced last week, according to FT. However, the company will no longer build infrastructure objects or objects for its employees and will no longer pay compensations to families of its deceased employees, reports China Economic News Service.

“If a worker in Taiwan commits suicide because of emotional problems, his employer will not be held responsible, but we are taken to task in China because they are living and sleeping in our dormitories," said Terry Gou.

According to the chairman, company would need three to nine months to adjust to the higher labor costs following the implementation of the pay hikes in the fourth quarter this year. At its shareholders’ meeting in Hong Kong, Chen Weiliang, chairman of Foxconn International Holdings, indicated that the company was studying how to pass the higher costs from the pay hikes to its clients and expects to complete negotiation for price hikes with clients in two to three months